I am amply sure in my mind that nobody wants to be on the wrong side of the law & be in trouble. However, for compliance, it is essential that the users should be able to understand the law. However, the truth is that neither the lawmakers nor the implementers are sure of what the provision of the law is all about & then the moot question is how the users comply with the law. Further, up to the first appeal, there is no hope for justice! However, the result is that more than 70 % cases are decided against the department in higher fora.  This is criminal waste of time, energy & efforts. The ground reality is pathetic in spite the fact that the government has been shouting from the rooftops about the ease of doing business.

As on date, the users are single handedly responsible because everything including imports & exports & domestic clearances are under self-assessment. The readers would note that self-assessment means that the assesses pay the legitimate taxes & behave in a gentleman like manner. With this stated objective, I should have no reason to complain & the systems should work & deliver. However, the readers would note that this is not the case because self-assessment is made to work in a detrimental manner i.e. the officials are least bothered about exercising due diligence & thus let the problems accumulate for the assesses & then one fine day they pounce upon you saying that a crime has been committed & the magnitude & implication of the accumulated problem is so huge that you have to go down on your knees. As a matter of fact, self-assessment is seen as complete lack of responsibility & accountability of the bureaucracy as if they only exist for dirty tricks & make money by the sides. It is pertinent to point that are to behave in a gentleman like manner then why the bureaucracy should not! I touch upon two points. 1. The framing of the law. 2. Responsibility & accountability in the system. The 1st point is clear i.e. the law should be made distinctly clear for compliance & should not be double meaning dialogue. About the 2nd point, I have to submit that why do you need the layers of officialdom, who are simply white elephants when a sound systems approach can deliver results when these officials are not willing to take any responsibility & they cannot be held accountable at all for anything because the assesses are doing self-assessment & therefore they are solely responsible. Why the government is then spending money on them for simply creating nuisance because more than 70% cases are decided against the department? Any sane mind will conclude that this should stop.

Now, I touch upon the issue of cash refunds in relation to the erstwhile C. Ex. regime where in the liability of the discharge of tax is settled after 1.7.17 & the credit due under the C. Ex. provisions cannot be no longer taken. The facts of the cas are such that there is a regular manufacturer exporter, who obtained Advance Authorizations in respect of exports under the erstwhile C. Ex. Regime operating under the CCR, 2004 but failed to fulfill partial export obligations under various Advance Authorizations. Therefore, the AA holder is required to discharge the duty liability under the erstwhile Central Excise regime & accordingly effected payment of the applicable Customs Duty & therefore paid the CVD as well as the SAD. The AA holder was entitled to the credit of the CVD as well as the SAD duty paid. However, due to the new GST regime being adopted in the meanwhile, they are not able to claim the Cenvat credit. The exporter is therefore compelled to seek the cash refund of this amount as the Cenvat credit is no longer available. The exporter filed the refund application according the transitional provisions contained under the GST regime citing the following.

S 142 of the CGST Act, 2017 speaks of the Transitional provisions & Sub Section (3) reads as under:

(C) Section 142(3): Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944) :

Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:

Provided further that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.

Further S 142 (6) (a) of the CGST Act, 2017 states that every reference relating to a claim of Cenvat credit initiated whether before, on or after the appointed day (1.7.2017) under the existing law shall be disposed of in accordance with the provisions of the existing law, & any amount of credit found to be admissible to the claimant shall be refunded in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of Sub section 2 of S 11B of the CEA, 1944 & the amount rejected, if any, shall not be admissible as input tax credit under this Act.

Therefore, any person with basic understanding of the law will understand that the law leaves no room for any manipulative interpretation & denial of the refund. Despite crystal-clear provision & the officials accepting that the Cenvat credit in terms of CCR, 2004 is available & the same is not allowed under the GST, the refunds are denied. How can the CBIC tolerate all this & keep their eyes & mouth shut? Why this sick mentality of harassing the assesses nipped in the bud by acting against the erring officials. The officials indulge into several frivolous objections such as that there is no appeal, review or reference related to the claim of Cenvat Credit initiated; C. Ex. Law ceases to operate because the same is replaced by the GST. The readers will note that there is no appeal or review required because there is a shortfall in exports & duty liability crystallized & validated by the DGFT officials & regarding the C. Ex. Law being no longer valid the answer is self-evident that how the CVD could then be collected. The irony of the case is that these very officials as a person accept that all this a farce & their hands are tied by the instructions from the top. The moot question is that why this pathetic state should have arisen in the first place if the communication related to refunds was handled properly. Please note that the CBIC did not advise the assesses to file refunds of any CVD/SAD paid in relation to the past liabilities explicitly & advertise the same. Such cunningness is unacceptable in a system governed by rule of law. Further, right at the point of time of collection, the payee should be alerted that the CVD/SAD payment is possibly refundable in cash through the refund route & the assesses should claim it. I would like to see such gentleman like behaviour from the bureaucracy lime in many other countries. In my personal analysis, the communication strategy of the CBIC & the GST Council has been very poor while introducing the GST & that has given rise to dissatisfaction to a large extent. Instead of reassuring the assesses that simply several taxes are being collected together, they created a fear as if everything has changed.

During personal discussions, I raised the point that why the government should increase their liability of interest payment by denying the refunds. I was aghast at the reply because I was informed that the government pays no such interest & no assesse has the courage to claim or recover the same. Even if this is true, then do you mean to say that the government should take the advantage of this position? Finally, even if the government is compelled to pay the interest @ 6% then too it is good because the cost of capital is higher. This sick mentality needs to be curbed & the government also needs to pay penal interest to the assesses in case of delays based on the principle of equity alone (because government charges penal rate of interest in case of delayed payment of taxes).

There are few other pitfalls of non-communication of the cash refund provision. Some of the assesses made payments of the lability in advance to claim the Cenvat credit before 30.6.17 to carry the credit forward in the GST regime. Now, this was not the right advise because if you were discharging the liability on your own accord then it was a provisional payment & a deposit until & unless that was accepted as duty after assessment therefore it resulted in delay in refunds. Again, these pitfalls were avoidable through proper communication & it was the prime responsibility of the CBIC & GST Council.

I reiterate that the assesses are simply interested in doing their business in full compliance of the laws but then the CBIC & GST council should help their cause instead of creating hurdles by changing even the formats of returns or the dates or frequency. It does not augur well. I am therefore compelled to say that the CBIC as well as the GST council should lead by example of gentleman’s behavior rather than being the stumbling block. This can help reduce litigation to a very large extent.

(Above are personal view of Author and he can be reached at rajiv.pec@gmail.com)

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December 2020